Jet Airways (India) has signed an agreement with Thai Airways to lease out three of its Boeing aircraft. Going by industry sources, it stands to earn rent of over $3 million (about Rs 140 crore) per month from the deal.
Online PR News – 20-April-2010 – – Jet Airways (India) has signed an agreement with Thai Airways to lease out three of its Boeing aircraft. Going by industry sources, it stands to earn rent of over $3 million (about Rs 140 crore) per month from the deal.
This is a positive development for the legacy carrier, which has four other Boeing aircraft on dry lease with Turkish Airlines.
Improved demand/ supply scenario should lift yields (pricing) for Jet Airways and the industry at large, according to Sachin Gupta of HSBC Global Research.
The carrier’s strategy to target the budget segment through Jet Konnect has worked. For the half-year ended September, Jet Konnect helped the company improve its market share by 200 basis points (or two percentage points) to 19% and thereby improve its load factor. Further, fixed costs have come down and that is expected to reflect in the numbers in the days to come.
Going forward, better than expected passenger traffic growth and earnings surprises could boost the stock’s performance. On the flip side, higher than expected rise in jet fuel prices and capacity addition could affect it adversely.
For the quarter ended December, Jet Airways posted a profit of Rs 106 crore, helped by seasonal growth and cost cutting.
At the current market price, Jet Airways trades at 38 times its estimated earnings for 2011.
Jet Airways’ stock has outperformed the broader markets in the last one year, gaining 174.2% to Rs 462.95 per share as against a 76.3% increase in the BSE Sensex.
“Our target FY12 EV/ Ebitdar multiple of 8.2 times (average of Chinese airlines and regional international airlines’ multiples) implies a target price of Rs 580 (was Rs 218),” Gupta of HSBC wrote in a note to clients on March 22. EV stands for enterprise value, while Ebitdar refers to earnings before interest, tax, depreciation, amortisation and rent.
Investors could consider the stock on declines.